Transcript of "Ch04 06 27 05"

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Chapter 4 Consumer Behavior, Market Research, and Advertisement

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Learning Objectives <ul><li>Describe the factors that influence consumer behavior online. </li></ul><ul><li>Understand the decision-making process of consumer purchasing online. </li></ul><ul><li>Describe how companies are building one-to-one relationships with customers. </li></ul><ul><li>Explain how personalization is accomplished online. </li></ul><ul><li>Discuss the issues of e-loyalty and e-trust in EC. </li></ul><ul><li>Describe consumer market research in EC. </li></ul>

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Learning Objectives <ul><li>Describe Internet marketing in B2B, including organizational buyer behavior. </li></ul><ul><li>Describe the objectives of Web advertising and its characteristics. </li></ul><ul><li>Describe the major advertising methods used on the Web. </li></ul><ul><li>Describe various online advertising strategies and types of promotions. </li></ul><ul><li>Describe permission marketing, ad management, localization, and other advertising-related issues. </li></ul><ul><li>Understand the role of intelligent agents in consumer issues and advertising applications. </li></ul>

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One-to-One Marketing, Loyalty, and Trust in EC <ul><li>one-to-one marketing </li></ul><ul><li>Marketing that treats each customer in a unique way </li></ul><ul><li>One of the benefits of doing business over the Internet is that it enables companies to better communicate with customers and better understand customers’ needs and buying habits </li></ul>

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One-to-One Marketing, Loyalty, and Trust in EC <ul><ul><li>personalization </li></ul></ul><ul><ul><li>The matching of services, products, and advertising content with individual consumers </li></ul></ul><ul><ul><li>user profile </li></ul></ul><ul><ul><li>The requirements, preferences, behaviors, and demographic traits of a particular customer </li></ul></ul><ul><ul><li>cookie </li></ul></ul><ul><ul><li>A data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site </li></ul></ul>

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One-to-One Marketing, Loyalty, and Trust in EC <ul><li>collaborative filtering </li></ul><ul><ul><li>A personalization method that uses customer data to predict, based on formulas derived from behavioral sciences, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles </li></ul></ul><ul><li>Variations of collaborative filtering </li></ul><ul><ul><li>Rule-based filtering </li></ul></ul><ul><ul><li>Content-based filtering </li></ul></ul><ul><ul><li>Activity-based filtering </li></ul></ul>

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One-to-One Marketing, Loyalty, and Trust in EC <ul><li>Customer Loyalty </li></ul><ul><ul><li>Customer loyalty is the degree to which a customer will stay with a specific vendor or brand for repeat purchasing </li></ul></ul><ul><ul><li>Customer loyalty is expected to produce more sales and increased profits over time </li></ul></ul><ul><li>e-loyalty </li></ul><ul><ul><li>Customer loyalty to an e-tailer </li></ul></ul>

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One-to-One Marketing, Loyalty, and Trust in EC <ul><li>Satisfaction in EC </li></ul><ul><ul><li>Satisfaction is one of the most important consumer reactions in the B2C online environment </li></ul></ul><ul><ul><li>Recent statistics show: </li></ul></ul><ul><ul><ul><li>80% of highly satisfied online consumers would shop again within 2 months </li></ul></ul></ul><ul><ul><ul><li>90% would recommend the Internet retailers to others </li></ul></ul></ul><ul><ul><ul><li>However, 87% of dissatisfied consumers would permanently leave their Internet retailers without any complaints </li></ul></ul></ul>

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One-to-One Marketing, Loyalty, and Trust in EC <ul><ul><li>trust </li></ul></ul><ul><ul><li>The psychological status of involved parties who are willing to pursue further interaction to achieve a planned goal </li></ul></ul><ul><li>How to Increase Trust in EC </li></ul><ul><ul><li>Trust between buyers and sellers </li></ul></ul><ul><ul><li>Brand recognition </li></ul></ul><ul><ul><li>EC security mechanisms can help solidify trust </li></ul></ul>

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Market Research for EC <ul><li>The Goal of Market Research </li></ul><ul><ul><li>To find information and knowledge that describes the relationships among consumers, products, marketing methods, and marketers </li></ul></ul><ul><li>The Aim of Market Research </li></ul><ul><ul><li>To discover marketing opportunities and issues, to establish marketing plans, to better understand the purchasing process, and to evaluate marketing performance </li></ul></ul>

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Market Research for EC <ul><li>market segmentation </li></ul><ul><li>The process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales </li></ul><ul><li>Segmentation is done with the aid of tools such as data modeling and data warehousing </li></ul>

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Market Research for EC <ul><li>Tracking Customer Movements </li></ul><ul><ul><li>transaction log </li></ul></ul><ul><ul><li>A record of user activities at a company’s Web site </li></ul></ul><ul><ul><li>clickstream behavior </li></ul></ul><ul><ul><li>Customer movements on the Internet </li></ul></ul>

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Market Research for EC <ul><ul><li>Web bugs </li></ul></ul><ul><ul><li>Tiny graphics files embedded on e-mail messages and in Web sites that transmit information about the users and their movements to a Web server </li></ul></ul><ul><ul><li>spyware </li></ul></ul><ul><ul><li>Software that gathers user information over an Internet connection without the user’s knowledge </li></ul></ul>

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Market Research for EC <ul><li>Analysis of B2C Clickstream Data </li></ul><ul><ul><li>clickstream data </li></ul></ul><ul><ul><li>Data that occur inside the Web environment; they provide a trail of the user’s activities (the user’s clickstream behavior) in the Web site </li></ul></ul>

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Market Research for EC <ul><li>Web Analytics </li></ul><ul><ul><li>Enable retailers to make site adjustments on the fly, manage online marketing campaigns and EC initiatives, and track customer satisfaction </li></ul></ul><ul><ul><li>If a company redesigns its Web site, it can gain almost-instant feedback on how the new site is performing </li></ul></ul><ul><ul><li>Web analytics help marketers decide which products to promote and merchandisers achieve a better understanding of the nature of demand </li></ul></ul>

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Market Research for EC <ul><li>Limitations of Online Market Research </li></ul><ul><ul><li>Too much data may be available </li></ul></ul><ul><ul><li>To use data properly, it should be organized, edited, condensed, and summarized </li></ul></ul><ul><ul><li>The solution to this problem is to automate the process by using data warehousing and data mining </li></ul></ul><ul><ul><li>Some of the limitations of online research methods are: </li></ul></ul><ul><ul><ul><li>Accuracy of responses </li></ul></ul></ul><ul><ul><ul><li>Loss of respondents because of equipment problems </li></ul></ul></ul><ul><ul><ul><li>The ethics and legality of Web tracking </li></ul></ul></ul><ul><ul><ul><li>Lack of representativeness in samples of online users </li></ul></ul></ul>

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Web Advertising <ul><li>Overview of Web Advertising </li></ul><ul><li>interactive marketing </li></ul><ul><li>Online marketing, enabled by the Internet, in which advertisers can interact directly with customers and consumers can interact with advertisers/vendors </li></ul><ul><ul><li>Two major business models for advertising online: </li></ul></ul><ul><ul><ul><li>Using the Web as a channel to advertise a firm’s own products and services </li></ul></ul></ul><ul><ul><ul><li>Making a firm’s site a public portal site and using captive audiences to advertise products offered by other firms </li></ul></ul></ul>

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Web Advertising <ul><li>Some Internet Advertising Terminology </li></ul><ul><ul><li>ad views </li></ul></ul><ul><ul><li>The number of times users call up a page that has a banner on it during a specific time period; known as impressions or page views </li></ul></ul><ul><ul><li>Button </li></ul></ul><ul><ul><li>Page </li></ul></ul><ul><ul><li>click (click-through or ad click) </li></ul></ul><ul><ul><li>A count made each time a visitor clicks on an advertising banner to access the advertiser ’s Web site </li></ul></ul>

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Web Advertising <ul><ul><li>CPM (cost per thousand impressions) </li></ul></ul><ul><ul><li>The fee an advertiser pays for each 1,000 times a page with a banner ad is shown </li></ul></ul><ul><ul><li>conversion rate </li></ul></ul><ul><ul><li>The percentage of visitors who actually make a purchase </li></ul></ul><ul><ul><li>click-through rate (or ratio) </li></ul></ul><ul><ul><li>The percentage of visitors that are exposed to a banner ad and click on it </li></ul></ul>

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Web Advertising <ul><ul><li>click-through ratio </li></ul></ul><ul><ul><li>The ratio between the number of clicks on a banner ad and the number of times it is seen by viewers; measures the success of a banner in attracting visitors to click on the ad </li></ul></ul><ul><ul><li>hit </li></ul></ul><ul><ul><li>A request for data from a Web page or file </li></ul></ul><ul><ul><li>visit </li></ul></ul><ul><ul><li>A series of requests during one navigation of a Web site; a pause of a certain length of time ends a visit </li></ul></ul>

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Web Advertising <ul><ul><li>unique visit </li></ul></ul><ul><ul><li>A count of the number of visitors to a site, regardless of how many pages are viewed per visit </li></ul></ul><ul><ul><li>stickiness </li></ul></ul><ul><ul><li>Characteristic that influences the average length of time a visitor stays in a site </li></ul></ul>

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Web Advertising <ul><li>Why Internet Advertising? </li></ul><ul><ul><li>Television viewers are migrating to the Internet </li></ul></ul><ul><ul><li>Advertisers are limited in the amount of information they can gather about the television and print ads </li></ul></ul><ul><ul><li>Other reasons why Web advertising is growing rapidly: </li></ul></ul><ul><ul><ul><li>Cost </li></ul></ul></ul><ul><ul><ul><li>Richness of format </li></ul></ul></ul><ul><ul><ul><li>Personalization </li></ul></ul></ul><ul><ul><ul><li>Timeliness </li></ul></ul></ul><ul><ul><ul><li>Location-basis </li></ul></ul></ul><ul><ul><ul><li>Digital branding </li></ul></ul></ul>

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Advertising Methods <ul><li>Banners </li></ul><ul><ul><li>banner </li></ul></ul><ul><ul><li>On a Web page, a graphic advertising display linked to the advertiser’s Web page </li></ul></ul><ul><ul><li>keyword banners </li></ul></ul><ul><ul><li>Banner ads that appear when a predetermined word is queried from a search engine </li></ul></ul><ul><ul><li>random banners </li></ul></ul><ul><ul><li>Banner ads that appear at random, not as the result of the user’s action </li></ul></ul>

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Advertising Methods <ul><li>Benefits of Banner Ads </li></ul><ul><ul><li>By clicking on them users are transferred to an advertiser’s site, and frequently directly to the shopping page of that site </li></ul></ul><ul><ul><li>The ability to customize them for individual surfers or a market segment of surfers </li></ul></ul><ul><ul><li>Viewing of banners is fairly high because “forced advertising” is used </li></ul></ul><ul><ul><li>Banners may include attention-grabbing multimedia </li></ul></ul>

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Advertising Methods <ul><li>Limitations of Banner Ads </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>A limited amount of information can be placed on the banner </li></ul></ul><ul><ul><li>Viewers have become somewhat immune to banners and simply do not notice them as they once did </li></ul></ul>

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Advertising Methods <ul><ul><li>banner swapping </li></ul></ul><ul><ul><li>An agreement between two companies to each display the other’s banner ad on its Web site </li></ul></ul><ul><ul><li>banner exchanges </li></ul></ul><ul><ul><li>Markets in which companies can trade or exchange placement of banner ads on each other’s Web sites </li></ul></ul>

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Advertising Methods <ul><li> pop-up ad </li></ul><ul><ul><li>An ad that appears in a separate window before, during, or after Internet surfing or when reading e-mail </li></ul></ul><ul><ul><li>pop-under ad </li></ul></ul><ul><ul><li>An ad that appears underneath the current browser window, so when the user closes the active window, he or she sees the ad </li></ul></ul><ul><ul><li>interstitial </li></ul></ul><ul><ul><li>An initial Web page or a portion of it that is used to capture the user’s attention for a short time while other content is loading </li></ul></ul>

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Advertising Methods <ul><li>Search Engine Advertisement— The major advantage of using URLs as an advertising tool is that it is free </li></ul><ul><ul><li>Improving a company’s search-engine ranking (optimization) </li></ul></ul><ul><ul><li>Paid search-engine inclusion </li></ul></ul><ul><li>Advertising in chat rooms </li></ul><ul><li>Advertising in newsletters </li></ul>

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Advertising Strategies and Promotions Online <ul><li>affiliate marketing </li></ul><ul><ul><li>A marketing arrangement by which an organization refers consumers to the selling company’s Web site </li></ul></ul><ul><ul><li>viral marketing </li></ul></ul><ul><ul><li>Word-of-mouth marketing by which customers promote a product or service by telling others about it </li></ul></ul><ul><ul><li>Webcasting </li></ul></ul><ul><ul><li>A free Internet news service that broadcasts personalized news and information, including seminars, in categories selected by the user </li></ul></ul>

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Advertising Strategies and Promotions Online <ul><li>Online Events, Promotions, and Attractions </li></ul><ul><ul><li>Major considerations when implementing an online ad campaign: </li></ul></ul><ul><ul><ul><li>Target audience of online surfers clearly understood </li></ul></ul></ul><ul><ul><ul><li>Traffic to the site should be estimated, and a powerful enough server used handle the expected traffic volume </li></ul></ul></ul><ul><ul><ul><li>Assessment of results is needed to evaluate the budget and promotion strategy </li></ul></ul></ul><ul><ul><ul><li>Consider co-branding </li></ul></ul></ul>

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Special Advertising Topics <ul><li>ad management </li></ul><ul><ul><li>Methodology and software that enable organizations to perform a variety of activities involved in Web advertising (e.g., tracking viewers, rotating ads) </li></ul></ul><ul><ul><li>localization </li></ul></ul><ul><ul><li>The process of converting media products developed in one environment (e.g., country) to a form culturally and linguistically acceptable in countries outside the original target market </li></ul></ul><ul><ul><li>Internet radio </li></ul></ul><ul><ul><li>A Web site that provides music, talk, and other entertainment, both live and stored, from a variety of radio stations </li></ul></ul>

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Special Advertising Topics <ul><li>Ad Content </li></ul><ul><ul><li>The content of ads is extremely important, and companies use ad agencies to help in content creation for the Web just as they do for other advertising media </li></ul></ul><ul><ul><li>Content is especially important to increase stickiness </li></ul></ul>

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Managerial Issues <ul><li>Do we understand our customers? </li></ul><ul><li>Should we use intelligent agents? </li></ul><ul><li>Who will conduct the market research? </li></ul><ul><li>Are customers satisfied with our Web site? </li></ul><ul><li>Can we use B2C marketing methods and research in B2B? </li></ul><ul><li>How do we decide where to advertise? </li></ul>

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Managerial Issues <ul><li>What is our commitment to Web advertising, and how will we coordinate Web and traditional advertising? </li></ul><ul><li>Should we integrate our Internet and non-Internet marketing campaigns? </li></ul><ul><li>What ethical issues should we consider? </li></ul><ul><li>Are any metrics available to guide advertisers? </li></ul>